Can anything stop the Palm slide?
The device firm’s stock plummeted Friday in the wake of its weak third quarter result. It closed down 29.16% at $4.00 and was off another 3 cents in after-hours trading.
The problem is the weak third quarter sales of its much-fancied Pre and Pixi devices, launched last year.
CEO Jon Rubinstein – the man behind the iPod who was headhunted three years ago – has bet the company on those products.
But customers aren’t buying them. Neither, it seems, are analysts.
Palm shipped 960,000 phones to mobile carriers in Q3, but sold just 408,000 of them. It expects Q4 revenue of less than $150 million, just half the $306 million forecast by analysts in a Thomson/Reuters poll, Reuters said.
Analysts appear to be closing the door on the stock. John Paczkowski on the WSJ’sAll Things Digital blog sampled a few:
Kaufman Bros. analyst Shaw Wu: “While we believe Palm has some value with its webOS and tight integration of hardware and software, we are unsure of the company’s prospects as an ongoing concern.”
Needham and Company’s Charlie Wolf: “Palm appears to be in a no-win situation. The company could invest even more in marketing the Pre and Pixi. But it’s unclear whether Palm could ever spend enough to reach a position where Pre and Pixi sales were sufficient to cover its marketing bill and return the company to profitability.”
Peter Misek of Canaccord Adams: “With what appears to us to be roughly 12 months of cash on hand, an accelerating burn rate, a complete lack of earnings visibility, and substantial debt and preferred equity we no longer see any value in the company’s common equity.”
Brutal.
John C. Abell, Wired editor and optimist, sees hope if Palm can make itself the consumers’ friend in the coming tether wars.
Remember, Apple has decided that the iPad and the iPhone should require separate SIM cards and be untetherable – in other words, users will need to sign up for a new 3G account, or rely on spotty Wi-Fi coverage.
But Abell points out that the Pre can turn itself into a hotspot for up to five devices and should aim to be phone of choice for iPad users.
A slender straw, but still a straw nonetheless.
Whatever the solution Palm comes up with, it will have to move quickly before the diminishing confidence of operators and suppliers evaporates altogether.
And it still has the problem that consumers aren’t buying its hot new phones.